Gold’s pain before gain, pundit mea culpas and more Apple hype

By Shawn Langlois

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Breakouts are coming. In bonds. Gold. Stocks. Ukraine. The euro zone.

The simmer will eventually turn to a boil and, in the stock market’s case, there’s a sense that when the moves come, they will be swift and wide enough to make up for all this time meandering in a tight range.

But trying to figure out how to play the game in the meantime is enough to drive an otherwise sane guy into the loving embrace of Nurse Ratched.

When the VIX drops this much and that stillness takes over, traders looking for some spice tend to reach a bit for vehicles that might deliver more of a bang. Penny stocks, for instance, are seeing a huge surge in volume (see below for more).

Gold may not be a sexy alternative to stocks, and if our call of the day is on point, it should probably be avoided in the short term. But so far this year, it’s popping up around the top of the asset class list, in terms of performance.

Considering gold’s penchant for clinging to the $1,300 level in the past couple of months, that says a lot about the other choices.

This market has its failings, but where it’s really succeeding is making pundits look foolish. When things slow down to this degree, it starts raining prognostications. If there’s no drama, create some. And the wrongness has been off the charts.

Dennis Gartman, for one, made another mea culpa over the weekend.

“Having called for a correction, I’ve been abundantly wrong,” he told CNBC. “People have been calling for corrections for the past five years, and the corrections don’t seem to occur.” He’s right. He’s got company in getting flummoxed by this market.

For what it’s worth, Gartman says he’s basically moved to a neutral position. “Every time you think you’re about to have a correction, you get a 1 or 2 or 3% lower, and then you move to new highs,” he said.

And, believe it or not, more look to be on the way this holiday-shortened week.

The economy: Durable goods rose 0.8% on military bookings, which rose by the biggest amount in 16 months. Overall orders were expected to fall by that amount. The FHFA house price index is still ahead price, while and the S&P/Case-Shiller price index showed a 0.9% rise, the fist in five months. After that, we’ll get some consumer-confidence numbers, as well as manufacturing data from the Richmond Fed and the Dallas Fed. See the Calculated Risk blog for the whole week’s lineup.

After a relative slumber, it seems bitcoin buyers are back in the game. The virtual currency is, once again, approaching the $600 level.

Thomas Piketty vs. the FT: “The FT is being ridiculous, because all of its contemporaries recognize that the biggest fortunes have grown faster.” Paul Krugman weighs in: “Anyone imagining that the whole notion of rising wealth inequality has been refuted is almost surely going to be disappointed.”

The chart of the day: If investors are feeling skittish about this market, you wouldn’t know it from how heavily weighted they are in equities. In fact, only once before has it been this extreme, and that was back in 2000. Didn’t end well. As Urban Carmel of the Fat Pitch blog points out, there’s still a hunger for the riskiest of risk names, considering trading in penny stocks has risen 40% in the past year, to the highest level on record. That’s what happens when volatility dries up. Investors hunt for action.

The call of the day:Gold
/quotes/zigman/698029/realtimeGCM4 is heading to $5,000 an ounce, says Austin Galt on the Safe Haven blog. Eventually. But before that day comes, there will be plenty of pain. The kind of pain that takes prices down below $1,000 an ounce. While breaching four digits will certainly hurt longs, it will also mean that “gold permabulls will go weak at the knees, their hopes crushed — just the signal that the correction will be over!” Read the technical analysis that leads him to this conclusion.

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.